Lecture Video 10
Lecture 10: Introduction: Elements of the Financial Statements
The last part of the study unit talks about the elements of the financial statements. The elements of these financial statements are laid down and given to us by IFRS. We've spoken about IFRS already; make sure you're comfortable with where that comes from.
The elements of the financial statement
Basically what we're saying is, “How do we categorise all the transactions and the financial information that’s taken place?” There's so much stuff going on, and there's so much stuff happening - how do we categorise each of them, and put them into specific headings, so I'm not mentioning things twice or not putting things in different categories?
IFRS gives us specific elements for both the statements of profit or loss and the statement of financial position. The statement of profit or loss - the elements are your income and your expenses, so we'll split everything between those two. And your statement of financial position, we deal with assets, liabilities and equity. Study Unit 2 we're going to go into detail about these, especially your assets and your liabilities. So we're going to go into a lot of detail what those are; how to recognise them; what they look like; that type of thing. And we've already looked at an example of what your statement of financial position looks like.
So whenever we're talking about your financial position, we talk about assets, liability and equity. And when we're talking about profit or loss, we're talking about income and expenses. These little words are going to become so much part of your language; you're going to be thinking about them in your sleep; so you need to make sure you very sure of what we call an asset.
It can be a little bit different to what we thought. When I was in high school, I was told that an asset is something that you can see and touch. It's not necessarily true, and we need to make sure that we comfortable with what IFRS, and what your financial standards, recognise an asset at, and I may not necessarily think it's the same thing as you. So we have to be very careful what you call an asset, and what I call an asset, income, expenses etc. The details of these, the definitions, we'll get through in Study Unit 2, and we'll be looking at the profit and loss ones in Study Unit 3.
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